UPDATE 1-Elan shareholders OK buyback as Royalty battle heats up

* Shareholders overwhelmingly back share buyback

* Royalty Pharma may sweeten offer ahead of deadline

DUBLIN, April 12 (Reuters) - Irish drugmaker Elan
got strong approval from shareholders for a $1 billion share
buyback as it seeks to keep them on side and stave off a
takeover approach from U.S. investment firm Royalty Pharma

The buyback, priced between $11.25 and $13.00 per share, was
backed by 99.2 percent of shareholders at a special meeting on
Friday.

It is part of plans to return cash to investors after the
$3.2 billion sale of Elan's interest in multiple sclerosis drug
Tysabri.

Royalty has said it reserved the right to reduce its
indicative approach of $11 per share if the buyback went
through. But it may also sweeten its proposal by paying more if
Tysabri, which Elan still receive royalties for, hits certain
sales milestones, two people familiar with the matter told
Reuters.

Elan has rejected Royalty Pharma's proposal, calling it a
"highly conditional indication of interest", and hopes instead
to reinvent itself in a series of acquisitions after the Tysabri
deal left it with just one experimental drug in its pipeline.

An Irish takeover panel has given Royalty Pharma until May
10 to make a firm offer or walk away.

Royalty is considering a formal offer at a slight premium to
where it is trading now along with offering shareholders upside
if blockbuster treatment Tysabri sells well, the sources said,
who asked not to be named because the talks were private.

Elan's shares trading on the New York Stock Exchange
closed on Thursday at $12.00 a share.

The Dublin-based company, which last month sweetened its own
proposition by agreeing to hand shareholders 20 percent of all
future royalties from Tysabri, will announce the final price of
the share buyback offer next Thursday.